If you are in default on your military star card then the Internal Revenue Service may take your tax refund to pay off your debt. As part of the Treasury Offset Program, your tax refund can be taken for many types of debts that are owed to the federal government. To learn more about which types of debts the federal government can take your tax refund for go to: Your Tax Refund Can Be Taken If You Owe Certain Types of Debts
The Military Star Card is a credit card issued by the Army and Air Force Exchange Service (AAFES), previously known as the AAFES card. The Navy version is the Navy Exchange Card, NEXCARD. These are only available to military personnel to be used for shopping at military exchanges (including online).
The creditors on these cards are agencies of the U.S. Department of Defense. Under the Treasury Offset Program, your tax refund can be offset against federal debts. The program will match those individuals owed a tax refund against those that owe a federal debt to the government. The U.S. Department of Defense participates in the Treasury Offset Program. As a result, if you are in default on one of these cards you could well lose your IRS tax refund.
But see this Wall Street Journal article, "U.S. to Repay Veterans in Debt Case," about a lawsuit settlement in which 6,715 former military personnel were repaid a total of $7.4 million (up to $10,000 each) because of illegal offsetting of tax refunds and Social Security benefits. The offset that occurred, was improperly done since the debts were past the statute of limitations.
Debts that are incurred on a Military Star Card are subject to discharge in a bankruptcy. You can protect your tax refund from being offset by the federal government by filing for bankruptcy. Once your debt from your Military Star Card is discharged in bankruptcy, the IRS will not be able to offset your tax refund. Call our office today to set up a free consultation at 866-337-7220. To learn more on how bankruptcy can help you keep your tax refund go to:What Happens to My Tax Refund in a Chapter 7 Bankruptcy?